Question

The discount rate is the rate of interest at which: Question 12 options: 1) Federal Reserve Banks lend to commercial banks. 2) savings and loan associations lend to some builders. 3) Federal Reserve Banks lend to large corporations. 4) commercial banks lend to large corporations

Answer 1

Answer:

1) Federal Reserve Banks lend to commercial banks.

Answer 2

Answer:

The correct answer is number (1): Federal Reserve Banks lend to commercial banks.

Explanation:

The Discount Rate is the interest rate a central bank charges to private banks on short-term loans. Banks also borrow each other for short-term needs, with central banks such as the U.S. Federal Reserve (Fed) usually operating as a last-resort lender. As a consequence, it tends to have its discount rate somewhere above that which is charged by private banks.